It seems today like the dominant players in computing, social media, infrastructure, services, and many other big industry segments is settled. It is easy to look at the current environment and say Google and Apple have both won. Both have large thriving ecosystems in the hottest segments of technology. Yet as Benedict Evans and I discussed on our last podcast, while everything seems settled, in reality, the future is still very much anyones game.
Taking into all the major players strategies is essential. Here are some thoughts on a few of the major players.
Microsoft faces some of the most difficult questions in my opinion. What kind of company is Microsoft going to be in the future? This is the key question a new CEO must address. The market where they dominate market share, the PC, is contracting in annual sales every year. They are not participating relevantly in any of the growth sectors like smartphones and tablets. Is Microsoft a commercial company whose destiny is to focus on backend services like IBM and be a much smaller company than they are today? Are they going to choose to only focus on commercial applications and ignore consumer ones?
If their current commercial which aired during the Super Bowl yesterday is any indication then lets hope they see themselves as a technology company rather than just an operating system company, software company or an enterprise services company.
Microsoft is among the top spenders in research and development. Ranking #2 of the top 2,000 companies according to the European Union. Samsung was number 2, Google number 13 and Apple number 46. Samsung should not be a surprise given the number of businesses they are in. Microsoft on the other hand is not in nearly the same number of businesses as Samsung but spend nearly as much as them in RND in 2013. If Microsoft can commercialize their R&D spending in a meaningful way they can evolve beyond their own platforms and enable a broader ecosystem. While I have serious questions and doubts about Microsoft going forward, I’d be more optimistic about them if they evolved into a broader technology company driving growth for themselves and others out of their R&D.
Apple may always have the smaller ecosystem. A fundamental question to explore is now much this matters. There are industry executives who have seen and participated in key paradigm shifts in this industry who believe that the smaller ecosystem always loses. Yet there is no clear answer from them as to why. It is not a foregone conclusion that the smaller ecosystem always loses. As long as an ecosystem is supported by a long list of third parties the ecosystem will thrive. There does come a point in time when an ecosystem is too small to support, take RIM and Windows Phone as examples.
I believe Apple can successfully acquire and maintain an ecosystem of around 800-900m ((I have logic and deeper analysis from my firm Creative Strategies to justify these numbers)) install base of core device hardware. By core device hardware I mean computers small, medium, and large. Apple will inevitably offer peripheral businesses to the hardware core, and those may be software or other hardware businesses (new categories) but they will all revolve around personal computers small medium and large. At least for the foreseeable future.
Assuming Apple can maintain this core user base, which will err toward the higher more profitable segments of the market, then I am confident their ecosystem will sustain and thrive, despite what many believe about ecosystems (800-900m is not really a small ecosystem).
Apple’s latest ad 1.24.14 is an excellent insight into Apple’s product future.
30 years ago we introduced Macintosh. It promised to put technology in the hands of the people.
By the end of the video you get the sense that the iPhone is the promise and full manifestation of that vision. It ends making the point that the entire video was created with the iPhone in one day.
Personal computing is the focus. In the hand of many is the goal.
Interestingly, while many seem to have established Google’s future being secure, I’m still not so sure. At least I’m not sure about what they offer today as being what sustains them or secures their future. Android is actually still a moving target for Google. It seems established but it is actually a quite fluid product and strategy. Android may look entirely different in 5 years if it even exists.
As evidenced by the recent Samsung and Google patent deal, which likely includes a lot more than the patents, Google is able to leverage their services to bend OEMs to their will. Which gives us a clear line in the sand between Android OEMs using Google services and those that are not. The focus then should not be on Android but Google’s services. Services like search, maps, the play store, and more are at the core of what Google uses to push their agenda.
This is what makes China so fascinating. 90% of the Android install base in China is Android Open Source Project (AOSP) and have not been certified by Google to receive their services. China is unique in that Google’s services are mostly blocked at a network level inside the country. This is why so many alternatives to Google’s services exist in China and are used by the masses. Android AOSP makes it very simple for a hardware company to install a platform and in essence create their own unique platform. This is the case with Amazon, Xiaomi, and many other OEMs. I estimated the market share of Android AOSP vs. Google’s Android with their services in the chart below.
Developing regions like India, Latin America, and Africa are all big continents with lots of people where smartphones are growing the fastest. India has many local smartphone OEMs like Micromax, LAVA + XOLO, and Karbonn. While these devices do utilize Google’s services, what is stopping regional upstarts or entrepreneurs from creating their own set of competitive services to Google’s specifically designed to only serve the unique interests of that region?
Google is a services company that monetizes those services through ads. Whether advertising is their business model or something else in 5yrs time, or longer, I believe Google will see increased competition in many of their services which they depend heavily on.